BA Cost Performance Drives Profit

10 February 2003

London, Monday February 10, 2003: British Airways today reported a pre-tax profit of £25 million for the three months to December 31, 2002 against a pre-tax loss of £160 million for the same period last year.

The three month pre-tax figures took the results for the nine months to a profit of
£335 million, (2001: £115 million loss).

Operating profit for the quarter was £53 million, (2001: £187 million loss). For the nine months, operating profit was £459 million (2001: £65 million loss).

Unit costs improved for the fourth consecutive quarter and were down by 9.4 per cent on the same period last year. This reflects a net cost reduction of 10.8 per cent on capacity which was 1.6 per cent lower in ATKs.

Borrowings, net of cash, short term loans and deposits, were £5,186 million at
December 31, down £1.4 billion from the December 2001 peak.

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Manpower reductions since August 2001 total 9,209 and are on track to achieve
10,000 by March 2003 and 13,000 by March 2004.

Group turnover for the third quarter at £1,857 million was up 1.0 per cent on a flying programme 1.6 per cent smaller as measured in ATKs. Passenger yield, measured in RPKs,
in the third quarter was down 4.5 per cent (2001: up 0.3 per cent). Seat factor for the quarter was up 5.7 points at 70.9 per cent on capacity which was 1.8 per cent lower in ASKs.

Cargo volumes for the quarter were up 11.4 per cent compared with last year, with yields down 5.0 per cent as measured in CTKs. Passenger and cargo capacity, measured in ATKs, was up 5.5 points at 67 per cent. For the nine months, overall load factor was up 3.8 points to 67.3 per cent.

Rod Eddington, Chief Executive, said: “One year on, our Future Size and Shape programme of cost control and simplification continues to make us a leaner, fitter and more competitive airline. Our total costs in the last 12 months are £1 billion lower than the previous year which demonstrates the determination of our people to deliver.

“We have restructured our European shorthaul business and the new, lower, year round fares are now available on almost 180 routes with more customers than ever before booking via the net. UK on-line bookings continue to exceed all targets with 37 per cent of the new fares being booked on ba.com.”

Lord Marshall, Chairman, said: “In the absence of hostilities in the Middle East, we expect this financial year to be profitable. We expect the business environment to be tougher in 2003 than last year. Forecasting revenue against the backdrop of the threat of war, increasing competitive pressure and uncertain economic outlook is difficult, but at this stage we anticipate no revenue growth over the next 12 months.

“Our focus remains on managing our controllable costs. The implementation of our Future Size and Shape programme is on track and delivering more than the expected cost savings.

“Business restructuring, in particular cost cutting and cash conservation, have left the company well positioned for the uncertain markets that lie ahead.”